Undetachable Stock Warrant - Explained
What is an Undetachable Stock Warrant?
Written by J. Mance Gordon
Updated at April 20th, 2024
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What is an Undetachable Stock Warrant?
An undetachable stock is the same as a convertible stock, it refers to a bond that can only be converted to a stock at maturity or redemption but cannot be sold as distinct from the bond. Hence, an undetachable stock warrant gives its holder the right to substitute a bond for another security, usually a stock at redemption. Oftentimes, the security for which the bond is substituted offers better return. An undetachable stock warrant is used by holders when they want to generate profit from a bond by converting it into stock.
How is an Undetachable Stock Warrant Used?
When a preferred stock is issued, it usually comes with a warrant, this warrant cannot be detached from the preferred stock. If the warrant holder decides to exercise the warrant right, a specific amount of stock can be purchased at a specific price. An undetachable warrant allows a holder to substitute a bond for a stock at redemption, the warrant cannot be sold separately form the bond.